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Variety Pass-Through: An Examination of the Ready-to-Eat Breakfast Cereal Market

Timothy J. Richards¹; Stephen F. Hamilton²

¹ Arizona State University · ² California Polytechnic State University

We examine variety pass-through effects that occur when multiproduct retailers adjust the length of their product lines in response to changes in wholesale prices. Studying variety pass-through is essential to understanding how wholesale price changes transmit into retail prices when variety is endogenous. Using data from the ready-to-eat breakfast cereal category, we find that retailers jointly adjust retail prices and the length of their product lines in response to changes in wholesale prices. We show the importance of controlling for the endogeneity of retailers’ product line decisions when calculating price pass-through rates.

DOI

10.1162/rest_a_00447

Volume

97 (1)

Pages

166-180

Language

en

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BibTeX

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